One of the key aspects of the current global order is the unjust economic policies and institutions that have been imposed by the victors of the Second World War. The principal vehicles by which the US and its allies exercise their economic hegemony are the World Bank and the International Monetary Fund (IMF). Even though the World Bank and IMF are often discussed in terms of their failed methods and programs, the main props of the thought behind them are flawed. The fact that their flawed principles are widely accepted as ultimate “truths” about what defines economics and development, is what allows them to continue to exist. Therefore, it is the flawed pillars of their thought that must be exposed through scrutinizing their methods of work.

Flawed Past and Methods

We must immediately dismiss the empty IMF-World Bank slogans about fighting poverty; their primary function is to make capitalism “work” for the rich. Many of their members genuinely believe in the supremacy of the methods and programs they employ. However, the people who really call the shots fully understand that their mode of operations is inconsistent with human development and the well-being of society. It would otherwise be impossible to justify how after decades of failed Structural Adjustment Programs (SAP), the IMF can still claim that its policies eliminate poverty and create development. IMF studies dating back as far as 1988 confirm that the 40 or so programs implemented between 1983 and 1987 failed in their objectives of enhancing economic growth. In 1979, 15 of the world’s most repressive regimes received World Bank loans for which they were not held liable, but their citizens were. In the mid-80s under the guise of trying to bring “democracy” to places like Romania and Sub-Saharan Africa the World Bank provided vast loans, more accurately, monetary hand outs, to the ruling regimes to become subservient to US strategic interests. Sub-Saharan Africa, traditionally the World Bank’s main client, is still an extremely poor region due to the “shock therapy” administered to make capitalism work.

SAP is the main instrument used by the World Bank/IMF because it advocates “perfect capitalism” which many understand today as deregulating the economy. SAPs start with the demand to remove subsidies (that help the poor) on basic foodstuffs such as rice and wheat, and services such as water and electricity. This confirms that SAPs are not aimed at improving the lives of those most in need. The World Bank almost never provides loans for agricultural development, which is the cornerstone of poverty and famine reduction. Without sound agricultural industry a country will remain vulnerable to social unrest and be dependent on others for its very basic needs: food.

In order to understand the inconsistency of SAPs with what it means to have a developed economy, let us unmask some of its sophisticated vocabularies and see the effects of its core principles (refer to the table on the next page)

According to Joseph Stiglitz, former Chief Economist at the World Bank and winner of the Nobel Prize in Economics in 2001, the reason China and India performed better than Indonesia during the Asian economic crisis of 1997 is “because they refused to follow the dictum of the IMF in terms of capital liberalization.”

Hypocrisy being embedded in their nature, the US and its strategic allies conduct their political and economic policies along similar lines. While the US constantly preaches free market and free trade to others, it conducts its own economic policy completely differently: imposing quotas on imports and offering farm subsidies by purchasing surplus agricultural produce to keep the farmers in business. This explains why the US has done “better” economically than others so far.

In 2008 the US began subsidizing its cotton production industry and was forced to slightly re-adjust this policy in April 2010 when Brazil threatened to impose tariffs on 100 US goods and to break American pharmaceutical patents. While US academics try to brain wash people from Third World countries into believing that every country should only focus on mastering the production and development of goods and services of only a few items, to “create competitive advantage,” the US itself focuses on all sorts of goods and services in order to be independent of others and be able to produce as many products as possible.

What must be done?

Those aware of the misery that IMF-World Bank policies cause, advocate institutional reform as a remedy. It is not reform of the methods or institutions that is crucial but reform of the principles that form the understanding of modern economics. Since SAPs have become totally discredited, the World Bank adopted a new economic “development” plan in 2002 under the title Poverty Reduction Strategy Papers (PRSPs) which is almost identical to SAP. PRSPs are SAPs under a different name. The reason for World Bank’s introduction of this “new” policy was to maintain the fundamental principles of SAP by simply giving it a new name. The case with SAPs and PRSPs shows that tactical reforms are not enough, there needs to be a fundamental change of principles.

We see how the Greek government after running its economy to the ground immediately accepted the austerity conditions set by the IMF, at the expense of an average Greek citizen. The IMF provided a loan to Greece conditional on cuts in public wages, tax hikes and pension freeze without arousing any protest globally shows that the global hegemons are able to sell “free market and deregulated economics” as viable economic solutions to the world at large. The imperialist powers managed to force the idea on the world public that there are no alternatives to “free” market capitalism.

Prior to the most recent financial crisis, uttering the phrase “government bailout” in the US would immediately have evoked labels like backward and/or communist. However, the crisis has shown that some regulations are necessary and deregulated economies do not result in economic development and social justice. The standardized notion of a “free market economy” not only fails to provide adequate economic success to the masses, but also fails to sustain the hoarded wealth of the elites who manufacture the rules of the modern economic bubble.

Economists worldwide must reshape the fundamental principles of modern economics. Concepts such as “supply and demand” must be exposed as fraudulent. The concept of using the GDP as a scale to measure the so called prosperity of countries must be altered and exposed as useless. The so called “free floating currency” concept must be exposed as a prank method in evaluating currencies. Until all of the above mentioned illusionary “truths” about economics are challenged and exposed as totally invalid from an economic perspective, the World Bank and the IMF will always find ways to justify their flawed methods as viable solutions.

According to Ayatullah Muhammad Baqir al-Sadr shaheed, the great scholar of Islamic jurisprudence and economics, from an Islamic perspective the solution to modern economic fallacies lies in altering the economic relationship between humans. In his masterpiece on Islamic iqtisad (from the word qasada, which is different from economics) titled, Iqtisaduna (Our Iqtisad), Ayatullah Sadr states that the way to change the economic relationship of humans is through (1) cessation of the various forms of oppression manifest in the unjust distribution of resources; (2) disciplining of “human nature to achieve control of the instinct of self love; and (3) utilization of resources to satisfy the needs of all humanity. Ayatullah Sadr states,

Under Islamic system of iqtisad, earning is exclusively linked to working. All other means of earning and ownership are abolished.

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The possession of natural resources is not considered legitimate without continuous human efforts to develop it. Any type of earning that does not require human labor, in commerce as well as in production, is forbidden. For this reason, the use of financial capital to generate earning is abolished; the only legitimate way to make use of capital is to invest it in production and share the risk of profit and loss. To ensure the utilization of capital in economic development, Islam strongly forbids the hoarding of money and initiates a yearly tax to downgrade any wealth that is not enrolled in the production process. Additionally, any type of useless economic activities, such as gaming, magic and jugglery, are forbidden in Islam.”

Islamic intellectual centers have shown many philosophical, juristic, theological and socio-political perspectives of Islam. However, the modern world has turned a great part of humanity within and outside of the Muslim world into materialistic automatons. Until Muslims present viable economic solutions, they will not achieve the revelational purpose of Islam which is to construct a society based on the sovereignty of Allah (Â) and justice. Islam is a way of life that takes into consideration the human soul and the material body. Part of that material body is the economic necessities of a human being which Islamic law addresses. These laws must be put into practice in order to present an Islamic alternative on satisfying the economic needs of humanity. The path to achieve this goal in the realm of economics is through research that provides contemporary and practical solutions to economic fallacies of the current global order. These solutions must alter the flawed doctrines of the current unjust economic order.